IP event season is upon us and at least three conferences are worth noting.

The first takes place this week in New York, March 21-22, the 9th annual Corporate IP Counsel Forum. The USPTO Keynote will be given by Mary Boney Denison, Commissioner for Trademarks and Mark Powell, Deputy Commissioner for International Patent Cooperation.

The featured session will be “Reconsidering Patent-Eligibility under Section 101.” Speaker faculty can be found hereand the conference agenda here. I understand that there are only a few seats left.

IP CloseUp readers can save $200 by using registration code IPCNYC.

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The World IP Forum will take place this year April 26-28 at the Shangri-La Hotel in Bengaluru (Bangalore), India. The theme for the conference is “Harnessing the Power of Intellectual Property.” The fourth edition of this three-day conference will focus on recent developments in intellectual property and its syncing with business objectives. Past participants have include Judge Randall Rader and former USPTO Commissioner Q. Todd Dickinson.

On May 18 San Francisco’s Golden Gate Club (at the Presidio) will be the site for IAM’s IP Software Summit. The Summit is the first event to provide a platform for professionals from the software industry to discuss open innovation, open source and proprietary systems, collaboration, the scope of patent protection, and monetization.

It is unclear that companies with the most significant increases in R&D spending are securing more, better quality or valuable patents.

A random study of the R&D spending and U.S. patent granted three years following of 12 leading technology companies conducted by Brody Berman Associates shows that costly corporate research spending does not necessarily result in more patents or those with greater impact.

Cisco’s annual R&D spend, for example, increased 11.3% from 2010 to 2013, to just under $6 billion, yet the number of patents granted to it over that period was down 21% to about 900.

Google’s R&D increased 110% to $8B annually over that same period, but its patents granted were up 573%. According to Envision IP the majority were in US classes 455, 709, 370, 715 and the much observed 705. (See chart below.)

Granted there are many reasons why one company receives more patents than another: Is the business building its portfolio or merely maintaining it? Does it do business in a mature or maturing sector? Is it planning to use the patents defensively or to monetize them through out-licensing?

Microsoft’s R&D was up to about $10.5B in 2013 from 2010, but its patents received were down 14%. Is MSFT investing in fewer, better quality patents, or was the decrease merely the luck of the draw? Everyone except Cisco spent more on R&D, but not everyone necessarily received more patents for doing so. Qualcomm’s R&D was up 96% and its patent grants were up 220%. IBM’s $6B+ R&D, a 3% increase, resulted in 16% more patents. Were these of lesser quality than Microsoft’s. It would be interesting to compare.

Intel conducted the most expensive R&D of the group, nosing out MSFT for the spending lead. For its some $10.6B in 2013, a 60% increase over its 2010 budget, it received 12% fewer U.S. patents, or about 1,700. One would hope they are better patents. “The number of reverse citations for Intel increased from an average of 25 in 2010 to 30 in 2013,” says Maulin Shah of Envision IP.

“A higher number of reverse citations may indicate the relative validity of a patent – the more art that is cited on the patent and during prosecution lessens the pool of available prior art that may be used to challenge the validity of the patent based on prior art grounds later.

The trend suggests that a business, no matter how solvent, cannot necessarily “buy” valuable patents or generate meaningful innovation by spending more on R&D. A lower yield per R&D dollar spent may mean better quality patents, but, then again, it may not. More research needs to be done on R&D and how best to measure return on it.

Patents remain a “numbers” game, more focused on quantity than quality, but these R&D/delayed grant figures indicate that the trend is far from universal among large technology companies.

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“The cost for IP varies per industry sector,” a revered former head of IP business and strategy told me recently, “but also within a sector it depends on whether a company is a technology leader, fast-follower or in catch-up mode.

“Cost is further determined by the patent efficiency (number of patents filed per million dollar investment in R&D), which relates also to patent quality. If you analyze this you will see some significant differences in numbers (and patent quality), and also in patent cost. Some followers or late entrants have a high patent efficiency (high number of patent filings per million investment in R&D) just to create large numbers (quantity over quality).”

“With technology leaders there is mostly a kind of non-linear relationship between the number of patent filings and R&D budget (decrease in patent efficiency with increasing R&D budget).

“It generally also holds that companies with less than average R&D budgets in their sector of industry (followers, new entrants) will have higher third-party IP costs, whereas companies with higher than average R&D budgets (technology leaders) will generally have higher benefits from their own IP.”

Cisco deal shows reports of patent licensing’s death have been greatly exaggerated.

Patent licensing may no longer be what it once was in areas of art like smart phones and consumer electronics, where the royalty stack can be as high as an Asian office tower, and courts and lawmakers have rendered legitimate patent enforcement an obstacle course.

But high stakes patent licensing is alive and well, and it does not necessarily require a Markman hearing or impending trial to get a deal done.

Kudos to Joff Wild and the IAM team for breaking the sparsely reported story on Cisco’s patent settlement with Rockstar for $188M. A decade or more ago the numbers may have been even more impressive, but in a sector that has been decimated by patent-adverse legislation and court decisions, things may not be as bad as they appear.

“Cisco has agreed to settle with Rockstar on behalf of both itself and its customers,” writes Wild on the IAM Blog. “And the price that Rockstar has extracted is the not inconsiderable sum of $188 million; all that before Markman hearings, let alone a full trial. It’s hard to see how that is not a good result for the Ottawa-based NPE run by CEO John Veschi and jointly owned by Apple, BlackBerry, Ericsson, Microsoft and Sony.”

Unanswered Questions

What patent holders should be asking themselves, is why that amount and why now?

One experienced IP adviser and investor I spoke to said that “the deal was likely supported by a comprehensive patent portfolio, which likely mitigated potentially much larger damages exposure.”

In other words, for the right price, and the right licensee, the numbers start to make sense, even in this environment. It also means that good patent portfolios still have significant value, even if it is a fraction of what it was a decade or two ago. In Rockstar’s case, could they have gotten $1B or more in 2002. Who knows? We’re not in Kansas anymore, Toto.

Rumors about Rockstar’s long-term viability have persisted since it was formed with much fanfare in mid-2011. It was then and still is now difficult to justify the $4.5B price tag paid for the bankrupt Nortel’s patents, but the buyers secured the opportunity to minimize potentially damaging exposure, especially from Google, at a time when they felt they had little choice.

The investment return, I am certain, was secondary for at least some of the five investors. Corporate governance issues have been said to be an obstacle to monetizing the Rockstar portfolio, and protecting owners from potential counter-suits difficult.

Apple and Microsoft, the primary investors — reputedly to the tune of $3.5B , certainly have the cash to not worry about the future income from Rockstar, and therein may lie the trouble for the operating company-owned NPE.

Still, what was said by Mark Twain can be said of patent licensing: “Reports of their death have been greatly exaggerated.”

For the latest news on patent licensing companies click below:

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About Bruce Berman

I'm a long-time intellectual property observer, adviser and editor, who is in close close contact with the leading holders and most influential people. I track the latest trends and developments, and monitor patent and other IP transactions, strategy and performance.

Since 1988 I have been working with IP holders, managers, lawyers and investors to properly explain the importance of their assets to key audiences, frame disputes and convey transactions.

My five books, including the IP best-seller FROM IDEAS TO ASSETS, deal with IP rights as business assets. THE INTANGIBLE INVESTOR, the column I have been writing for IAM Magazine since 2003, looks at ways IP rights impact stakeholders. For my complete bio visit www.brodyberman.com or click on the link below.